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Personal Income, Consumer Spending Switch Places


Friday, June 26, 2020

Market indexes on Thursday turned early morning selling into robust buying by the closing bell. This morning, we’re starting out the same way — down on COVID-19 updates in the South and Western U.S. and the subsequent obstacles to a clean reopening of the economy. Will we see mid-day news that reverses the markets’ trajectory as we did yesterday with the FDIC loosening bank investment restrictions?

If we do, it would likely come from the only economic data report hitting the tape after the opening bell: Consumer Sentiment for June, from the University of Michigan. Expectations are for a continuation of the uptrend we’ve seen since bottoming out a couple months ago at 71.8. Last month posted a 78.9, and estimates for the current month are at 79.3. Although it’s hard to see how a much bigger number here would tell us anything truly surprising, thus setting off a fresh buying spree — everyone knows there is pent-up consumer demand; should it be hotter than expected it would likely move the needle only a little bit.

Ahead of today’s open, Personal Income and Consumer Spending for May came in, demonstrating the wild volatility we’ve begun to grow accustomed to in the market. Today’s Personal Income headline of -4.2% was better than anticipated; analysts had been looking for this metric to take out the all-time low of -4.7%, following the previous month’s all-time high +10.8%. Coronavirus-led layoffs, congressional bailout measures and now the expiring of relief programs are taking this on a real rollercoaster ride.

For Consumer Spending, we get a mirror image: +8.2% for May blew away the previous all-time high back in the 1950s of 2.8%, following an upwardly revised -12.6% from the -13.6% originally reported. Consumer Spending, which makes up 2/3 of the U.S. economy, reflects the perceived wealth in income gains for Americans from the month before. Eventually, these figures will start settling down.

Currently, the U.S. accounts for slightly more than 25% of all COVID-19 cases reported, worldwide. Though it appeared for a moment we’d be overtaken as the main global hotspot for the coronavirus by Brazil, our charts have returned to previous highs, with little apparently ready to pull it back. We currently have had 2.5 million cases of COVID-19 in the U.S. to date, with a fatality toll of more than 126K.

Mark Vickery
Senior Editor

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